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GDP Isn't Gross (it's Highly Netted)

Dr. George Reisman has published an article in the AJES arguing that the concept of Gross Domestic Product is, in fact, highly netted — due to an error that's nearly universally committed by economists.

Standard thought is that the value of a final product includes the value of all the intermediate products that were consumed in its production, and that therefore counting the value of those intermediate products would be double-counting.

Reisman argues persuasively, and in terms easily accessible to the layperson, that the value of a final product does not include the value of intermediate products. He shows the mathematical error that leads to so much confusion between the concepts of gross and net, and briefly indicates the implications for macroeconomic theory.

You can download Reisman's article from the Mises blog.

Please note that if you've downloaded it already, you may have downloaded an incorrect version. The original file had several lines missing (completely whited out) on each of three pages. The file behind the link was silently corrected sometime in the last few days.

You can also download Reisman's book Capitalism, which contains some earlier thought along these same lines in Chapter 15.

Tiny Island